CMS Tightens the Screws on Supplier Standards

WASHINGTON–For years, home medical equipment providers have
been asking for further guidance on what many have called vaguely
written supplier standards with inconsistent interpretation among
inspectors and lax oversight. On Friday morning they got a response
from CMS–in spades plus some.

In an 11-page draft rule published in the Federal
Register, CMS proposed clarification and expansion of existing
standards along with the addition of others that all HME providers
must meet to participate in Medicare and retain billing
privileges.

“For many years, concern about easy entry into the Medicare
program by unqualified or even fraudulent providers or suppliers
has led us to increase our efforts to establish more stringent
controls,” CMS said in explaining the proposal. The agency said the
additions and modifications are necessary “to ensure that
legitimate DMEPOS suppliers are furnishing items of DMEPOS to
Medicare beneficiaries.”

“These changes are substantive and dramatic in many respects,
and they will alter the way many suppliers do business,” said
industry attorney Neil Caesar, who runs the Columbia, S.C.-based
Health Law Center. Caesar added he thinks “it is likely that most
of these proposals will become law.”

Following are some among the proposed rule’s changes to existing
standards:

–A change to standard No. 1, which deals with state and federal
licensure and regulatory requirements, would require that suppliers
providing licensed services not contract out those services. In
order words, personnel furnishing licensed services (in states that
require licensing of any aspect of a provider’s business) must be
“W-2 employees, not 1099 independent contractors,” Caesar said. “A
huge number of suppliers have their nurses and respiratory
therapists working on a contract basis,” Caesar pointed out.
“That’s a major change that will affect not just a lot of
suppliers, but a whole lot of suppliers.”

–CMS would expand existing standard No. 7 regarding physical
facilities and appropriate sites. The agency is proposing that
hours of operation be posted on permanent signage at the main
entrance to the supplier location, even if the business is in a
building complex where it is not the only tenant. “That means
everything showing who you are, where you are and when you are
open” has to be posted at the main entrance, Caesar said. “That’s
going to be a problem with a lot of buildings because the landlords
don’t do this for any of their tenants. It may be contrary to the
signage options that are available.”

In addition, the location must be staffed during the posted
hours and must be accessible “regardless of whether beneficiaries
routinely visit the facility,” according to the proposal. The
requirement also would apply to “closed door” businesses, such as
pharmacies or suppliers providing services only to beneficiaries in
a nursing home. “A supplier is not in compliance with this standard
if no one is available during the posted hours of operation,” CMS
said.

Under standard No. 7, the agency is also seeking comments on
whether to establish a minimum square footage requirement, and
notes that suppliers must meet “applicable local zoning
requirements.”

–A revision to standard No. 9 “is a big one having to do with
the business telephone,” Caesar said. While the current standard
requires a phone number to be listed in the directory and prohibits
a cell phone number as the primary business telephone, “what they
are thinking about is expanding the old rule to say you can’t use a
cell phone or a beeper as a method of receiving calls, or call
forwarding to forward calls to a cell phone or a beeper.” The
proposal also prohibits answering machines, answering services or
fax machines as the primary business phone during operating
hours.

“What they are really trying to do here is to force suppliers to
operate in a traditional retail context regardless of whether they
are doing retail,” Caesar said. “The ability to field calls from
the road is really being curtailed under these proposed rules,” he
continued. “They tout the problem of questionable businesses as the
reasoning behind the rule, but it is going to affect many one- or
two-man operations where they have to multi-task and are often
off-premises.”

Under this revision, Caesar said, “the phone rings on location
and someone on location picks it up.”

–CMS has proposed two changes to standard No. 10, which
requires $300,000 in comprehensive liability insurance. “The
differences are that now the policy will be required per incident,
and it has to expressly cover both the place of business and all
customers and employees,” Caesar said. “In addition, you will have
to have this in force before you apply to enroll in the Medicare
program, which means you are going to have to pay for the policy
not knowing whether you are going to get a supplier number.”

–A revision to standard No. 11, which nixes contacting
beneficiaries by telephone in order to solicit business, extends
the prohibition to email, instant messaging, Internet advertising
on sites unrelated to DMEPOS products and in-person contacts.
“Basically you can’t do cold-calling unless you’re an exception,
the exception being you’ve had a recent relationship with the
person or they’ve given you permission to do it,” Caesar said,
adding that CMS “is making it clear they are cracking down on
enforcement. You can lose everything if you violate this.”

Among new supplier standards, CMS is proposing:

–That suppliers obtain oxygen from state-licensed oxygen
suppliers. The standard would only apply in states that license
oxygen suppliers, but when a DME company is located in a state that
requires licensing for oxygen suppliers, the company must obtain
oxygen from a licensed supplier, regardless of the state where the
oxygen supplier is licensed.

–That historic ordering and referring documentation, including
NPI numbers, be maintained for seven years after claims have been
paid.

–That suppliers cannot share a location with other Medicare
suppliers, including physicians. “Because they recognize that could
create issues for medical practices or doctors who also supply DME,
CMS is soliciting comments on what to do about that,” Caesar
said.

–That suppliers must be open to the public a minimum of 30
hours per week (either six hours a day, five days a week or five
hours a day, six days a week). “We believe that … all legitimate
DMEPOS would need to be open at least 30 hours a week in order to
attract, retain and serve Medicare beneficiaries,” according to the
proposal. According to Caesar, this could be another significant
issue for small providers “who must handle both the office
activities and deliveries. They will have to be in the office a
significant amount of time, which could limit routine delivery
times,” he said.

–That suppliers cannot have an IRS or a state “tax
delinquency,” defined as money owed, a conviction for or a charge
of tax evasion, or a tax lien. Providers who do not comply with
this standard will have billing privileges revoked, CMS said. In
its reasoning, the agency noted a report from the Government
Accountability Office that found more than 21,000 providers
reimbursed under Part B owed taxes totaling more than $1 billion in
2005.

CMS will accept comments on the proposed rule until March
25.

Read the proposed rule in full.

For a review of current supplier standards, see “Are You on the
NSC’s Naughty or Nice List?” by Neil B. Caesar and Kelly R.
Pickens,
HomeCare, May 200